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Augean PLC Interim Report 2012

Aligning our business for future growth

Augean PLC is a market-leading, UK-based specialist waste and resource management group focused on providing a broad range of services to the hazardous waste sector.The Group’s comprehensive management service covers the complete solution to the final disposal of hazardous and difficult waste streams.

Our service is underpinned by quality assets and skilled people, able to respond to a broad range of customer needs.

Review of the periodHighlights 01

Chief executive’s review 02

Financial statementsUnaudited consolidated statement of comprehensive income 09

Unaudited consolidated statement of financial position 10

Unaudited consolidated statement of cash flows 11

Unaudited consolidated statements of changes in shareholders’ equity 12

Notes to the interim financial statements 13

Advisers and company information IBC

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01Augean PLC Interim Report 2012

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Review

of the period

Financial statements

Highlights

Financial highlights – Revenue including landfill tax increased to £20.0m (2011: £19.4m)

– Net revenue increased to £17.5m (2011: £16.0m)

– Adjusted profit before tax increased to £0.9m (2011: loss £(0.1)m); total £0.5m (2011: £0.1m)

– EBITDA fell to £3.0m (2011: £3.5m) after payment of exceptional costs

– Net debt increased to £6.6m (2011: £3.5m) following investments in new business streams

Operational highlights – Increased landfill volumes, driven by remediation activity

– Challenging markets for waste transfer and treatment activities restricted growth

– Price and cost control improved operating margins

– Contracts secured for new industrial cleaning services

– Capital investment made in new waste treatment capabilities

Strategic developments – Low Level Waste disposal successfully commenced at East Northants

Resource Management Facility (ENRMF)

– Minerals extraction commenced at Cooks Hole

– Agreements signed to operate a high temperature incinerator with energy recovery capability

– Acquisition of a majority shareholding in a new offshore waste management business to exploit opportunities in the North Sea waste market

– Reduction of capital approved by the High Court

– September approval of planning permission for extension of ENRMF site life to December 2016

Revenue including landfill tax

£20.0m(2011: £19.4m)

Cash flow from operations

£1.2m(2011: £2.0m)

Net debt

£6.6m(2011: £3.5m)

02 Augean PLC Interim Report 2012

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Chief executive’s review

Strategy The activities of the Group remain focused on the management of specialist wastes using proven technology, providing solutions to our customers that are mutually beneficial and environmentally compliant. In the annual report 2011 we set out the key opportunities for 2012, many of which were entering the delivery phase, and during the first half of the year the Group has continued to deliver the strategy through the completion of three of these major projects. Each of the opportunities has been constructed to support the full utilisation of the Group’s assets and deliver longer term returns above its cost of capital.

Low Level Waste (LLW)The long process to secure and confirm the planning permission required to allow the Group to accept LLW at East Northants Resource Management Facility (ENRMF) has now concluded. On 23 July 2012 the Group received notification that the application for permission to appeal to the Supreme Court against the decision by the Secretary of State to allow disposal of LLW had been refused. This concludes the legal process and confirms that the original planning permission was lawful.

During the first half of the year the Group secured two contracts for the disposal of LLW through the national framework managed by Low Level Waste Repository Limited. Early shipments have commenced for one of the contracts with Research Site Restoration Limited (RSRL) from their Harwell facility. Numerous enquiries have also been received from new customers for smaller volumes. The disposal of the initial quantities of LLW at ENRMF to date has demonstrated that the policies and procedures in place to handle this waste stream safely are effective and have met the standards required by the relevant regulators. The board remains confident of meeting the forecast to dispose of 2,000 tonnes of LLW in the year, weighted towards the second half as the contract volumes increase with the scaling up of decommissioning activities, and of the ongoing value that this activity will add to the Group’s profitability and cash flows. However, given the infancy of this sector the speed at which this new market opportunity can be unlocked remains uncertain.

OffshoreOver the past two years the management and treatment of waste generated from exploration for oil and gas in the North Sea has been part of the Group’s activities and provided a valuable revenue stream through a waste treatment contract with Scomi Oiltools (Europe) Limited (Scomi). On 29 May 2012 we announced that this relationship had been extended to allow the Group to play a full part in the North Sea waste market, with the creation of a new company, Augean North Sea Services Limited (ANSS). Augean purchased 70% of the equity in the newly formed company from Scomi on 30 May 2012,

The results for the first half of the year showed an improvement from H1 2011 as the Group leveraged its strength in the hazardous waste landfill and land remediation markets.


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paying £2.05m for the shareholding and also providing a loan of £1.0m to ANSS, which allowed Scomi to repay existing debt. The loan is secured against the property assets owned by the venture in Aberdeen and is repayable over an eight year period. No financial goodwill arose from the transaction.

The newly formed company builds upon the existing relationship between Augean and Scomi for the treatment of drill cuttings from offshore oil and gas exploration, using Augean’s thermal treatment and disposal facilities at Port Clarence, Middlesbrough and Scomi’s offshore waste management resources, based in Aberdeen. By combining these activities through ANSS, the business has the capability to source, contain, treat, recycle and ultimately dispose of offshore wastes for its customers through an integrated waste management supply chain.

The company now operates assets transferred from Scomi’s previous UK operations, based at sites in Aberdeen and Lerwick in Shetland. These assets include offices and industrial premises, which provide a base for managing and storing wastes, a large waste treatment and storage facility at Pocra Quay in Port of Aberdeen providing waste management services to Platform Service Vessels (PSVs), and specialist equipment used in the management and transportation of waste materials from North Sea drilling platforms. 35 experienced employees are based in Aberdeen, many of whom spend time offshore to manage the collection and shipment of waste. New sales and marketing resources have recently been added to the business.

ANSS is currently providing services to previous Scomi customers and will progressively develop its activities and services over the next twelve months. At the core of the operation will be drilling waste management on the offshore platforms, supported by onshore treatment of drill cuttings (provided through a service contract with the existing Augean facility at Port Clarence) and treatment and disposal of other wastes from PSVs utilising the specialist treatment and storage facility at Pocra Quay.

ANSS represents an excellent opportunity to combine the existing assets, knowledge and skills of Augean and Scomi in the UK to develop a business which is expected to deliver annual revenues of £6.0m and EBITDA of up to £0.75m. The business is well placed to take advantage of expected market growth and also participate in the emerging offshore decommissioning market, with the opportunity to develop proven technologies to enhance the recovery of North Sea waste streams.

EnergyAs previously reported, the generation of energy from waste or using the Group’s available land bank remains a medium term opportunity for the Group. The potential projects in this area are numerous but during 2012 attention has focused in three areas: the continued production of energy from our two landfill gas generation plants, the generation of energy at the new East Kent facility (see overleaf) and the recovery of oil for use as fuel. Work continues on these and the development of other small-scale energy generation projects.

MineralsWe announced in March 2012 that the Group had signed an agreement to allow the extraction of limestone and sand from its site at Cooks Hole, Northamptonshire. The extraction of these minerals was activated during June and will now contribute a minimum income of £175k per annum in the form of royalty payments.


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Development activitiesEast Kent Waste Recovery Facility (EKWRF)Since the inception of the Augean business the board has recognised the value that a commercial waste incineration facility would add to its capabilities and with the creation of the Waste Network division in early 2012 the sales and operational infrastructure had been put in place to secure appropriate waste volumes for such a facility. We were therefore delighted to sign agreements on 16 April 2012 with Pfizer Limited to manage and operate a commercial high temperature incinerator (HTI) at the Discovery Park in Sandwich, Kent (please note these agreements have since been novated to the new owner of the Discovery Park site, namely Discovery Park Limited).

The agreements include a number of associated facilities, supporting the day to day management of the main HTI facility. The HTI will be made available to existing and potential new customers for the management and incineration of a range of waste streams, as defined and agreed within the operational permit issued by the Environment Agency. The HTI is expected to provide capacity to process 10,000 tonnes per annum of waste and also benefits from its ability to recover energy from the process, making the facility the only HTI in the UK with this capability. Augean is also responsible for the management of certain waste streams and will provide waste management services to local businesses at Discovery Park.

EKWRF is now operating under its own environmental permit and is fully integrated into the Waste Network division, aligning the assets at Discovery Park with the Group’s existing national network of waste transfer stations and providing the sales and support infrastructure to market the new services across the UK and, potentially, into Europe. The integration of the facility into the Waste Network division aims to accelerate growth in sales as we are able to leverage our position in key strategic markets, namely pharmaceutical, chemical and secure destruction, using the Network infrastructure, which in turn will deliver the necessary growth to provide a sustainable long term business.

Development of the customer base for the facility will take place during the second half of 2012, focusing on a range of high value, contracted waste streams. Volume capacity is expected to be reached by the start of 2013. Once fully operational, EKWRF is expected to deliver revenues to the Group of between £2.0m and £3.0m per annum and EBITDA contributions between £0.3m and £0.5m.

Net revenue excluding landfill tax

£17.5m(2011: £16.0m)

EBITDA

£3.0m(2011: £3.5m)

Operating profit before exceptional items

£1.2m(2011: £0.2m)


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Planning and permittingThe securing of planning permission and maintenance of appropriate environmental permits at the Group’s sites is an essential part of the ongoing operations and future development of the Group. During the first half of the year planning and permitting activities have been focused on securing extensions to the operational life of two landfill sites, at ENRMF and Thornhaugh.

Planning permission for the disposal of non-hazardous waste at the Thornhaugh site expires in December 2013. An application has been submitted to Peterborough City Council, who will determine the application during the second half of the year. The initial feedback from this process is positive and we are confident of securing the relevant permissions to allow the site to continue its operations until 2028.

At ENRMF two applications have been submitted to extend the life of the site beyond the current deadline of August 2013. A local application was made to Northamptonshire County Council to provide a time extension for the site to remain operational until 2016, allowing the existing void capacity to be filled and the currently active areas to then be fully restored1. An application has also been submitted to the Planning Inspectorate to propose an extension of the capacity and operating life of the current site through the development of land to the west of the existing landfill within the boundary of the entire site. This would extend operations to 2026. The Planning Inspectorate acts on behalf of the Secretary of State for Communities, examining planning applications for projects of national significance. This application includes hazardous and low level waste and would allow the Group to increase the capacity of the site by up to 1.2m cubic metres of landfill void and extend the land remediation activities at the remediation centre. The examination process will continue until early 2013 with a decision by the Secretary of State anticipated in the third quarter of 2013.

Capital reductionAt the annual general meeting on 8 June 2012 shareholders approved the capital reduction of Augean PLC (the company). Subsequent hearings in the High Court on 18 and 27 June led to the capital reduction being confirmed on 4 July. To effect the reduction the share premium account of the company (valued at £114.9m) will be cancelled, creating a special profit reserve in the company and group balance sheets. This will be reflected for the first time in the accounts published for the year ending 31 December 2012.

Performance The results for the first half of the year showed an improvement from H1 2011 as the Group leveraged its strength in the hazardous waste landfill and land remediation markets. Against a backdrop of reducing economic activity in the UK, falling landfill volumes and a competitive environment in the specialist waste markets, the Group was able to grow sales revenues from landfill activities and maintain consistent performance in other waste transfer and treatment activities.

Following a reorganisation at the start of 2011 the Group now operates through three divisions (Land Resources, Waste Network and Oil & Gas Services) and a subsidiary company, ANSS.

1. On 18 September 2012 the application to extend the life of ENRMF was approved by the Development Control Committee of NCC, providing permission to continue existing operations at the site until December 2016.


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Performance continuedLand ResourcesLand Resources includes the assets of the former Landfill division, where volumes of waste disposed grew by 6.7% during the first six months to 192,087 tonnes (H1 2011: 179,952 tonnes). Previous market trends have continued, with greater pre-treatment of waste before disposal utilising the facilities at our Remediation Centres at ENRMF and Port Clarence. Remediation volumes grew by 43% when compared with the same period in 2011. The volumes of traditional hazardous waste disposed directly to landfill were flat year on year at 59,015 tonnes (H1 2011: 60,664 tonnes) with prices also remaining consistent. Limited volumes of LLW were received during the six months as we concluded the technical and commercial work to enable inputs from decommissioning projects, with the majority of the expected 2012 volumes weighted towards the second half of the year.

The focus of the Land Resources division’s activities remains the provision of solutions for customers as they seek secure and environmentally sound recycling and disposal routes for their waste and to support this the division has broadened its range of waste treatment options during the first half of the year with the commissioning of stabilisation plant at the Port Clarence site and the construction of a bio-remediation facility at ENRMF.

Waste NetworkThe Waste Network division saw a £0.7m reduction in sales revenues from the equivalent period in 2011, impacted by the decline in economic activity across the UK, a competitive market for waste transfer activities, but largely by the transfer of ash treatment activity out of the division’s sites and into the Land Resources division (£0.4m). However, the division was able to deliver improvements to gross margins following tight cost control and a sharp focus on the disposal costs of waste to third parties. Over the six month period the division delivered a 5% gross margin improvement, which produced an operating loss (before exceptional costs) equivalent to the first half of 2011. This result has included absorbing £0.1m of costs for the set up and initial operation of the new East Kent Waste Recovery Facility. The focus for the second half of the year will be to build on these margin improvements and leverage the Group’s established sales force and broad range of service offerings to grow sales revenues. This will be led by a new divisional director, with extensive experience of business to business sales and marketing, to drive the strategy and performance forward.

Oil & Gas ServicesSales revenues in the Oil & Gas Services division increased once adjusted for the impact of site closures during 2011. Revenues fell at the division’s Avonmouth site by £0.4m from the equivalent period the year before but this was part of a deliberate strategy to refocus its activities and utilise the available assets to generate higher gross margins, which led to delivery of an 8% improvement to margins when compared to the first half of 2011. At the Port Clarence Waste Recovery Park the local management have continued to develop the capability of the Indirect Thermal Desorption plant (ITD), which is now delivering consistent throughput and treatment performance. The plant is now the only one of its kind operating in the UK and forms an essential part of the Group’s development of offshore waste services, supporting ANSS by focusing its activities


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largely on the treatment of drill cuttings from North Sea oil and gas exploration. With other sites operating to plan, including the development of new industrial services capability, the division delivered an operating profit (before allocation of central costs) in line with the previous year.

Although performance has been consistent in the first six months the Group’s management remain focused on the need to improve the profitability of both the Waste Networks and Oil & Gas divisions. Results for the first half of the year were in line with expectations but more remains to be done to drive revenue growth and secure higher margin, contracted waste volumes. In the current economic environment this will be challenging, but the Group expects the full operation of the EKWRF to have a positive impact on its scope of activities.

ResultsExcluding trading in the new ANSS business net revenue excluding landfill tax for the six months ended 30 June 2012 increased by 5.6% to £16.9m (2011: £16.0m). With the inclusion of landfill tax charged to customers of £2.5m (2011: £3.4m), on which the Group makes no margin, and ANSS revenues, total group revenue was £20.0m (2011: £19.4m).

Within the Landfill Resources division sales revenues, excluding landfill tax and inter-segment trading, were £9.1m, an increase of £1.8m from the same period in 2011 (2011: £7.3m). Before any allocation of finance charges and exceptional items the division made an operating profit of £3.4m (2011: £2.2m).

Following a group reorganisation the previous treatment division now operates as Waste Network and Oil & Gas Services, each division having its own income statement and attracting an allocation of central costs (including sales, marketing, technical and support services) based on the respective divisional headcounts and revenues. The restated results for Waste Network delivered sales revenues, excluding inter-segment trading, of £2.7m (2011: £3.3m) and an operating loss before exceptional items of £(1.0)m (2011: £(1.0)m). For Oil & Gas Services revenues were £5.1m (2011: £5.4m), which included the impact of closing the Ellesmere Port site during 2011, and the operating loss before exceptional items was £(1.2)m (2011: £(1.1)m). In both divisions losses were adversely impacted by an increase in the costs of insurance, as the Group’s policies were extended to provide more comprehensive cover, and also by an allocation of the costs incurred by the Group in refinancing its bank debt.

The underlying operating profit for the Group, before charges for exceptional items, increased to £1.2m (2011: £0.2m) in the period. After charges for the impact of exceptional costs of £0.3m (2011: credit of £0.2m) relating to the project costs associated with delivering new business opportunities, the operating result was a profit of £0.9m (2011 £0.4m) and following deductions for finance charges of £0.3m (2011: £0.3m) the profit before tax was £0.5m (2011: £0.1m). The Group’s profit before tax and exceptional items was £0.9m (2011: loss £(0.1)m).

Corporation tax charges for the six months were estimated at £210k (2011: £nil). Landfill tax, at the full rate, increased by £8 per tonne to £64 per tonne on 1 April 2012.


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Results continuedThe adjusted profit per share before exceptional items was 0.65p (2011: loss of 0.11p). The basic earnings per share was 0.33p (2011: 0.12p). The board does not recommend the payment of a dividend.

The Group invested £3.6m in the first half of the year on new business ventures and the ongoing capital investment cycle. Capital expenditure was £1.6m (2011: £1.4m), including new treatment facilities, upgrades to IT hardware and planning and permitting developments. Total investment in capital projects in the year is expected to be £3.5m. New business investment involved a £2.05m payment to purchase 70% of the share capital of Augean North Sea Services Limited from Scomi Oiltools (Europe) Limited and in addition there was also provision of a £1.0m loan to the new business.

Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) was £3.0m, generating cash flow from operations of £1.2m (H1 2011: £2.0m). The year on year reduction reflected the costs of development projects in H1 2012 and payments made to capital debtors held over from H2 2011. After deducting investment expenditure, finance charges and tax, net debt at 30 June 2012 rose to £6.6m (H1 2011: £3.5m; H2 2011: £4.0m), increasing by £2.6m from the previous year end. The net debt equated to a gearing level of 14% (2011: 9%). The Group continued to operate comfortably within its banking covenants and following the renewal of its bank facilities in March 2012 has access to £10.0m of funds, committed until March 2015.

OutlookThe outlook for 2012 remains unchanged since expectations were revised in March. There is no doubt that trading conditions in the UK waste markets will remain challenging for the remainder of 2012 and the pace at which the LLW market can be unlocked is uncertain but the board has maintained its forecast for profit before tax and exceptional items at £2.7m for the full year. With little or no economic growth expected management will continue to focus on improving the performance of the new divisions and fully integrating the new business opportunities delivered over the first half of the year.

Paul BlacklerChief executive25 September 2012


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Note

UnauditedSix months

ended30 June

2012£’000

UnauditedSix months

ended30 June

2011£’000

AuditedYear

ended31 December

2011£’000

Continuing operationsRevenue 3 19,986 19,412 37,459Operating expenses (18,786) (19,218) (35,814)

Operating profit before exceptional items 1,200 194 1,645Exceptional items (318) 230 331

Operating profit 882 424 1,976Finance charges (332) (300) (571)Share of result of jointly controlled entity (10) (8) (16)

Profit before tax 540 116 1,389

Profit/(loss) before tax and exceptional items 858 (114) 1,058

Tax 4 (210) — 193

Profit for the period and total comprehensive income 330 116 1,582

Profit attributable to: Equity shareholders of Augean PLC 329 116 1,582 Non-controlling interest 1 — —

330 116 1,582

Earnings per share Basic and diluted 5 0.33p 0.12p 1.59p

Unaudited consolidated statement of comprehensive incomefor the six months ended 30 June 2012


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of the period


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Unaudited30 June

2012£’000

Unaudited30 June

2011£’000

Audited31 December

2011£’000

Non-current assetsGoodwill 21,705 21,705 21,705Other intangible assets 51 40 49Property, plant and equipment 38,535 34,058 35,415Deferred tax asset 852 4 854Trade and other receivables 497 487 492

61,640 56,294 58,515

Current assetsInventories 211 84 217Trade and other receivables 8,931 9,270 7,660Cash and cash equivalents 4 33 4

9,146 9,387 7,881Assets classified as held for sale 200 — 200

Total assets 70,986 65,681 66,596

Current liabilitiesTrade and other payables (8,066) (8,656) (8,079)Current tax liabilities (749) (4) (538)Financial liabilities (1,132) (1,025) (1,332)

(9,947) (9,685) (9,949)

Net current liabilities (601) (298) (1,868)

Non-current liabilitiesFinancial liabilities (5,459) (2,473) (2,640)Provisions (6,972) (7,742) (6,668)Share of losses of jointly controlled entity (486) (468) (476)

(12,917) (10,683) (9,784)

Net assets 48,122 45,313 46,863

EquityShare capital 9,970 9,970 9,970Share premium account 114,960 114,960 114,960Retained losses (77,688) (79,617) (78,067)

Equity attributable to owners of the parent 47,242 45,313 46,863

Non-controlling interest 880 — —

Total equity 48,122 45,313 46,863

Unaudited consolidated statement of financial positionat 30 June 2012


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Note

UnauditedSix months

ended30 June

2012£’000

UnauditedSix months

ended30 June

2011£’000

AuditedYear

ended31 December

2011£’000

Operating activitiesCash generated from operations 6 1,184 1,978 4,713Finance charges paid (165) (151) (469)Tax paid — — (123)

Net cash generated from operating activities 1,019 1,827 4,121

Investing activitiesProceeds on disposal of property, plant and equipment — — 19Purchases of property, plant and equipment (1,566) (1,398) (4,186)Purchases of intangible assets (30) (4) (32)Purchase of businesses (net of cash and cash equivalents acquired) (2,043) — —

Net cash used in investing activities (3,639) (1,402) (4,199)

Financing activitiesDrawdown/(repayments) of borrowings 2,781 (333) 336Repayments of obligations under finance leases (161) (219) (414)

Net cash used in financing activities 2,620 (552) (78)

Net decrease in cash and cash equivalents — (127) (156)Cash and cash equivalents at beginning of period 4 160 160

Cash and cash equivalents at end of period 4 33 4

Unaudited consolidated statement of cash flowsfor the six months ended 30 June 2012


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Sharecapital£’000

Sharepremium

£’000

Retainedearnings

£’000

Totalattributable

to owners ofAugean PLC

£’000

Non-controlling

interest£’000

Total equity£’000

At 1 January 2011 9,970 114,960 (79,733) 45,197 — 45,197Total comprehensive income for the periodRetained profit — — 116 116 — 116

Total comprehensive income for the period — — 116 116 — 116

Transactions with owners of the company Share-based payments — — — — — —

Total transactions with the owners of the company — — — — — —

At 30 June 2011 9,970 114,960 (79,617) 45,313 — 45,313Total comprehensive income for the periodRetained profit — — 1,466 1,466 1,466

Total comprehensive income for the period — — 1,466 1,466 — 1,466

Transactions with owners of the company Share-based payments — — 84 84 — 84

Total transactions with the owners of the company — — 84 84 — 84

At 1 January 2012 9,970 114,960 (78,067) 46,863 — 46,863Acquisition of subsidiary 879 879Total comprehensive income for the periodRetained profit — — 329 329 1 330

Total comprehensive income for the period — — 329 329 1 330

Transactions with owners of the company Share-based payments — — 50 50 — 50

Total transactions with the owners of the company — — 50 50 — 50

At 30 June 2012 9,970 114,960 (77,688) 47,242 880 48,122

Unaudited consolidated statement of changes in shareholders’ equityfor the six months ended 30 June 2012


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1 Statutory informationThe financial information for the year ended 31 December 2011 set out in this interim report does not constitute statutory accounts as defined by Section 434 of the Companies Act 2006. The financial information relating to the year ended 31 December 2011 is an extract from the latest published financial statements on which the auditor gave an unqualified report that did not contain statements under Section 498 (2) or (3) of the Companies Act 2006 and which have been filed with the Registrar of Companies.

These interim financial statements are available from the registered office at 4 Rudgate Court, Walton, Wetherby, West Yorkshire LS23 7BF or from our website at www.augeanplc.com.

2 Accounting policiesThe interim financial statements have been prepared in accordance with the AIM Rules for Companies and on a basis consistent with the accounting policies and methods of computation as published by the Group in its annual report for the year ended 31 December 2011, which is available on the Group’s website.

In addition, one accounting policy, ‘business combinations’, has been amended by the Group since preparing its last annual report in respect of the recognition of the non-controlling interest arising on the acquisition of Augean North Sea Services Limited. This policy is based on the requirements of IFRS 3 ‘Business Combinations’, as follows:

Business combinationsThe acquisition method is used to account for all acquisitions. The consideration transferred is measured at the fair values of assets transferred, liabilities incurred and equity instruments issued on the acquisition date, which is the date on which control is transferred to the Group. In assessing control the Group takes into consideration potential voting rights, composition of the governing body and management team of the entity and any premiums paid to acquire equity interests.

The Group measures goodwill at the acquisition date as:

• the fair value of the consideration transferred; plus

• the recognised amount of any non-controlling interests in the acquiree; less

• the net recognised amount of the identifiable assets acquired and liabilities assumed, measured at their fair value.

When the excess is negative, a bargain purchase gain is recognised immediately in the statement of comprehensive income.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships, with such amounts generally recognised in the statement of comprehensive income.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result. Adjustments to non-controlling interests arising from transactions that do not involve the loss of control are based on a proportionate amount of the net assets of the subsidiary.

Notes to the interim financial statementsfor the six months ended 30 June 2012


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2 Accounting policies continuedBasis of preparationThe Group has chosen not to adopt IAS 34 ‘Interim Financial Statements’ in preparing these interim financial statements and therefore the interim financial information is not in full compliance with International Financial Reporting Standards.

3 Operating segmentsThe Group has four reportable segments, as described below, which are the Group’s strategic operating divisions. These operating divisions are monitored and strategic decisions are made on the basis of the division’s operating performance. The Group’s operating divisions provide different services to their customers and are managed separately as they are subject to different risks and returns. The Group’s internal organisation and management structure and its system of internal financial reporting are based primarily on these operating divisions. For each of the operating divisions, the Group’s chief executive (CE) (the chief operating decision maker) reviews internal management reports on at least a monthly basis. The following summary describes the operations of each of the Group’s reportable segments, with further details provided in the business review (pages 2 to 5):

• Land Resources division: Augean operates three modern hazardous and non-hazardous landfill operating sites based at East Northants Resource Management Facility (ENRMF), Thornhaugh in Northamptonshire and Port Clarence on Teesside, providing waste remediation and disposal services to its customers. The division includes a site at Cooks Hole in Northamptonshire where minerals are extracted and also generates energy from closed landfill cells.

• Waste Network division: Augean operates waste transfer sites across the UK, transporting, recovering, recycling and disposing of hazardous wastes on behalf of its customers.

• Oil & Gas Services division: Augean operates three waste treatment sites across the UK, with activities focused on the management of oil-contaminated waste. The division also provides specialist industrial cleaning services.

• Augean North Sea Services Limited: Through a 70%/30% owned subsidiary company with Scomi Oiltools (Europe) Limited Augean provides waste management and waste processing services to offshore oil and gas operators in the North Sea.

Information regarding the results of each reportable segment is included below. Performance is measured based on the segment profit before tax and exceptional items, as included in the internal management reports that are reviewed by the Group’s CE. This profit measure for each operating division is used to measure performance as management believes that such information is the most relevant in evaluating the results of each of the divisions relative to other entities that operate within these sectors.



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3 Operating segments continuedThe segmental results for the six months ended 30 June 2012 were as follows:

LandResources

division£’000

WasteNetworkdivision

£’000

Oil &Gas

division£’000

North SeaServices

subsidiary£’000

Group£’000

RevenueHazardous landfill activities 6,630 — — — 6,630Non-hazardous landfill activities 730 — — — 730Waste treatment activities 125 5,300 — 5,425Energy generation 74 — — — 74APCR management 1,886 — — — 1,886Low Level Waste management 62 — — — 62Processing of offshore waste — — — 362 362Rental of offshore equipment and personnel — — — 220 220Waste transfer activities — 2,537 — — 2,537

Total revenue net of landfill tax 9,382 2,662 5,300 582 17,926Landfill tax 2,508 2,508

Total revenue including inter-segment sales 11,890 2,662 5,300 582 20,434Inter-segment sales (244) (204) (448)

Revenue 11,646 2,662 5,096 582 19,986

ResultOperating profit/(loss) before exceptional costs 3,387 (1,014) (1,179) 6 1,200Exceptional items (45) (105) (168) (318)

Operating profit/(loss) 3,342 (1,119) (1,347) 6 882Finance charges (332)

Share of result of jointly controlled entity (10)

Profit before tax 540Tax (210)

Profit after tax 330

Attributable to: Equity shareholders of Augean PLC 329 Non-controlling interest 1

330

Exceptional items totalling £318k relate to legal costs and due diligence costs incurred to sign agreements to manage and operate the commercial high temperature incinerator at EKWRF of £105k, the creation of a new company, Augean North Sea Services Limited, to manage waste generated by oil and gas operators in the North Sea of £168k and restructuring charges of £35k.


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3 Operating segments continuedThe restated segmental results for the six months ended 30 June 2011 were as follows:

LandResources

division£’000

WasteNetworks

division£’000

Oil andGas

division£’000

North SeaServices

subsidiary£’000

Group£’000

RevenueHazardous landfill activities 4,815 — — — 4,815Non-hazardous landfill activities 982 — — — 982Waste treatment activities — — 5,415 — 5,415Energy generation 75 — — — 75APCR management 1,562 416 — — 1,978Low Level Waste management — — — — —Processing of offshore waste — — — — —Rental of offshore equipment and personnel — — — — —Waste transfer activities — 2,928 — — 2,928

Total revenue net of landfill tax 7,434 3,344 5,415 — 16,193Landfill tax 3,377 3,377

Total revenue including inter-segment sales 10,811 3,344 5,415 — 19,570Inter-segment sales (158) (158)

Revenue 10,653 3,344 5,415 — 19,412

ResultOperating profit/(loss) before exceptional costs 2,218 (970) (1,054) — 194Exceptional items 400 (25) (145) — 230

Operating profit/(loss) 2,618 (995) (1,199) — 424

Finance charges (300)

Share of result of jointly controlled entity (8)

Profit before tax 116Tax —

Profit attributable to equity shareholders Augean PLC 116

The segmental results for 2011 have been restated from the format used at 30 June and 31 December 2011, following a reorganisation of the Group’s assets and resources to create three new operating divisions and the acquisition of a controlling interest in ANSS, each of which is now reported as an operating segment.

All activities above are continuing and arise solely within the United Kingdom. Inter-segment trading is undertaken on normal commercial terms.



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Review

of the period

4 TaxThe charge to taxation is based on the estimated effective corporation tax rate for the year as a whole.

UnauditedSix months

ended30 June

2012£’000

UnauditedSix months

ended30 June

2011£’000

AuditedYear

ended31 December

2011£’000

Current tax

UK corporation tax on profits for the period at 38.9% (210) — (538)Adjustment in respect of prior period — — (119)

(210) — (657)

Deferred tax

Charge in respect of current period — — 135Adjustment in respect of prior period — — 715

— — 850

Total tax (charge)/credit (210) — 193

The Group’s consolidated effective tax rate in respect of continuing operations for the six month period ended 30 June 2012 was 38.9% (six months ended 30 June 2011: nil%). No assessment has been made of deferred tax charges in these interim statements, pending a full review including the impact of the acquisition of Augean North Sea Services Limited for the full year, ending 31 December 2012.

5 Earnings/(loss) per share Unaudited

Six monthsended

30 June2012

£’000

UnauditedSix months

ended30 June

2011£’000

AuditedYear

ended31 December

2011£’000

Profit/(loss) attributable to equity shareholders of Augean PLC

Profit after tax for the purposes of basic and diluted earnings per share 330 116 1,582Exceptional items 318 (230) (331)

Profit/(loss) after tax for the purposes of basic and diluted adjusted earnings per share 648 (114) 1,251

Number Number Number

Number of sharesWeighted average number of shares for basic and diluted earnings per share 99,699,414 99,699,414 99,699,414Shares deemed to be issued for no consideration in respect of share-based payment 258,132 — —

99,957,546 99,699,414 99,699,414

Earnings per shareBasic and diluted 0.33p 0.12p 1.59p

Adjusted (loss)/earnings per shareBasic and diluted 0.65p (0.11p) 1.26p


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6 Reconciliation of operating profit to cash generated from operationsUnaudited

Six monthsended

30 June2012

£’000

UnauditedSix months

ended30 June

2011£’000

AuditedYear

ended31 December

2011£’000

Operating profit 882 424 1,976Amortisation of intangible assets 29 13 32Depreciation 2,102 2,910 4,379After-care provisions 34 141 92

Earnings before interest, tax, depreciation and amortisation (EBITDA) 3,047 3,488 6,479Loss on sale of property, plant and equipment — — 188Share-based payments 50 — 84Decrease/(increase) in inventories 26 32 (101)(Increase)/decrease in trade and other receivables (1,851) (2,455) (752)(Decrease)/increase in trade and other payables (310) 1,412 438Increase/(decrease) in provisions 222 (499) (1,623)

Cash generated from operations 1,184 1,978 4,713

7 Analysis of changes in net financial liabilities Audited

31 December2011

£’000

Cashflow

£’000

Unaudited30 June

2012£’000

Cash and cash equivalents 4 — 4Overdraft (996) 199 (797)Bank loans due after one year (2,244) (2,980) (5,224)Finance leases and hire purchase contracts (732) 161 (571)

Net financial liabilities (3,968) (2,620) (6,588)


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Review

of the period

8 Business combinationsOn 30 May 2012 Augean PLC acquired the controlling stake in Augean North Sea Services Limited (ANSS), purchasing 70% of its share capital from Scomi Oiltools (Europe) Limited.

ANSS provides a comprehensive waste disposal route for all North Sea oil and gas industry operators, specialising in management of drill cuttings and associated waste streams. It is anticipated that the acquisition will complement Augean’s core waste disposal business and develop the utilisation of the Group’s asset base. The total consideration for the acquisition was £2,050k, settled in cash.

During the one month period ended 30 June 2012 ANSS contributed revenue of £582k and operating profit of £6k to the Group’s results. Management estimates that if the acquisition had occurred on the 1 January 2012, then consolidated revenue would have been £2,986k and the consolidated profit for the period would have been £443k. In determining these amounts, management has assumed that the provisional fair value adjustments that arose on the date of acquisition would have been the same if the acquisition had occurred on 1 January 2012.

Identified assets acquired and liabilities assumedThe following table summarises the recognised amounts of assets acquired and liabilities assumed at the acquisition date.

Assets and liabilities acquired as a result of the acquisition of ANSSFair value

£’000

Property, plant and equipment 3,656Current assets 660Current liabilities (387)Loans and borrowings (1,000)

Total net assets 2,929

The following fair values have been determined:Fair value

£’000

Property, plant and equipmentFreehold land and building – Woodside Road, Aberdeen 2,000Plant and equipment 708Leasehold buildings – Porca Quay, Aberdeen 948

Total property, plant and equipment 3,656


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8 Business combinations continuedGoodwill and intangible assetsNo goodwill has been recognised on the following basis:

£’000

Total consideration transferred (2,050)Non-controlling interest, based on the proportionate interest in the recognised amounts of the asset and liabilities of ANSS (879)Fair value of identifiable assets acquired and liabilities assumed 2,929

Goodwill acquired —

No intangible assets were acquired by the Group at the acquisition date.

Acquisition related costsThe Group incurred acquisition related costs totalling £315k in 2011 and 2012 in legal fees and due diligence costs. These costs were recognised within exceptional items in the Group’s consolidated statement of comprehensive income at 31 December 2011 and 30 June 2012.

9 Post period end eventsThere as been one significant event which as occurred post the period end, as follows:

Capital reductionAt the annual general meeting on 8 June 2012 shareholders approved the capital reduction of Augean PLC (the company). Subsequent hearings in the High Court on 18 and 27 June led to the capital reduction being confirmed on 4 July. To effect the reduction the share premium account of the company (valued at £114.9m) will be cancelled, creating a special profit reserve in the company and group balance sheets. This will be reflected for the first time in the accounts published for the year ending 31 December 2012.

SecretaryRichard Allen, ACMA

Registered office 4 Rudgate Court Walton Wetherby West Yorkshire LS23 7BF

Registered number5199719 (incorporated and registered in England and Wales)

Websitewww.augeanplc.com

Broker and nominated adviserSinger Capital MarketsOne Hanover Street London W1S 1YZ

AuditorGrant Thornton UK LLPNo 1 Whitehall Riverside Whitehall Road Leeds LS1 4BN

SolicitorsWalker MorrisKings Court 12 King Street Leeds LS1 2HL

BankersHSBC Bank PLCCity Point 29 King Street Leeds LS1 2HL

RegistrarsComputershare Investor Services plcThe Pavilions Bridgwater Road Bristol BS13 8AE


Review

of the period

Augean PLC Interim Report 2012

Advisers and company information

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Augean’s commitment to environmental issues is reflected in this interim report, which has been printed on Colotech silk comprising of paper from responsible sources certified by the FSC® and produced at mills with ISO 14001 environmental management systems.

Printed digitally by Pureprint Group. 99% of all dry waste associated with this production has been recycled. Pureprint Group is certificated to ISO 14001 environmental management system, is registered to EMAS the Eco Management Audit Scheme, is a CarbonNeutral® Company and has been awarded The Queen’s Award for Enterprise: Sustainable Development.

Both the printer and the paper mill are registered to ISO 14001.

Augean PLC4 Rudgate Court Walton Wetherby West Yorkshire LS23 7BF

Tel: 01937 844980 Fax: 01937 844241 www.augeanplc.com [email protected]

Contacting AugeanTo find out about how Augean can help your business call us on 01937 844980, fax us on 01937 844241 or email us at [email protected] to arrange for a sales adviser to call you.

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